Tag Archives: bankruptcy

SCOTUS ALERT: Trademarks and Bankruptcy

On Friday, the United States Supreme Court (SCOTUS) granted a petition for certiorari in the case called Mission Product v. Tempnology, in order to hear a case involving trademark law and bankruptcy law.  The issue that is to be heard relates to what happens to a trademark license when the owner of the brand files for bankruptcy.

Currently, the different Circuit Courts of Appeal are not all in agreement as to what should happen.  In certain particular Circuit Courts of Appeal, the licensor that files bankruptcy can use a particular bankruptcy code provision, identified as Section 363 under the Bankruptcy Code, in order to cancel the right of a licensee to use the bankrupt company’s trademark.  However, in certain other Circuit Court’s of Appeal, the courts have been allowing the trademark licensee the right to continue using the bankrupt’s trademark.

The issue is as much a question of trademark law as it is bankruptcy law.  Under the Bankruptcy Code, the law allows a bankrupt the right to accept or reject a contract, wherein both sides still have obligations.  This is known as an executory contract.  However, Section 363 contains an exemption for certain forms of intellectual property, but it currently does not include trademarks.

The two most well-recognized opinions where the courts’ position diverge is the Seventh Circuit and the First Circuit, which is where the Mission Product case is pending.  In essence, the Mission Product appellate court has held that courts should not impose upon a bankrupt the obligation to continue to monitor how its trademark was being used, which goes to the essence and policy of bankruptcy law.

Never a dull moment in intellectual property and bankruptcy law.

 

ERIC N. ASSOULINE, ESQ.

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Bankruptcy Update: 11th Circuit Strikes the “Remain Unpaid” Element from the New Value Defense to Preference Action

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On August 14, 2018, Court of Appeals for the Eleventh Circuit (which controls all Florida bankruptcy courts), ruled that certain language in a prior ruling from 1988 was dicta and not binding, and established a new landscape for defending against a preferential transfer claim through a “new value” defense.

In the past, under the authority of Charisma Investment Company, N.V. v. Airport Systems, Inc. (In re Jet Florida System, Inc.), 841 F.2d 1082 (11th Cir. 1988), the Eleventh Circuit was believed to be of the opinion that an offset against preference liability, for new value provided to a debtor, which were made within the preference period, could only be asserted to the extent that any new value extended to the debtor “remained unpaid” as of the date the bankruptcy petition was filed.

However, under the new Blue Bell decision, the Eleventh Circuit held that the language in Charisma was only dicta, not binding, and not accurate.  Therefore, going forward, new value need not remain unpaid as of the time of the bankruptcy petition.

This decision is important because it will eliminate the disincentive that creditors may have in extending credit to a struggling debtor, which was mentioned in the Blue Bell decision.

ERIC N. ASSOULINE, ESQ.

PLEASE NOTE OUR NEW MIAMI ADDRESS

Miami Tower, 100 SE 2nd Street, Suite 3105, Miami, Florida 33131

 Intellectual Property, Labor & Employment Law,  Real Estate, International Dispute Resolution, Commercial Litigation, Corporate Law, and Bankruptcy

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Strategic Considerations for the Bankruptcy Practitioner when Intellectual Property is Involved

20130904_093101-1Assouline & Berlowe Registered Patent Attorney Greg Popowitz will be speaking as part of a panel discussing the interplay between bankruptcy and intellectual property.  The Bankruptcy Section of the Broward Bar Association is hosting the discussion on Wednesday, January 13, 2016 from 12:00-1:30pm.  The lunch is being sponsored by the Bankruptcy Bar Association of the Southern District of Florida (BBA).

To register for the event, click here.  It will be an excellent discussion between bankruptcy attorney John Hutton, patent attorney Allen Bennett, and patent attorney Greg Popowitz.

1 CLE credit is pending.

Date: Tuesday, January 13, 2016

Time: 12:00 – 1:30pm

Location: BCBA Conference Center

Cost:   FREE BCBA Bankruptcy Section Members;

$15 BCBA Member(non-section member)

$25 Non-Member of BCBA

No Charge BCBA Judiciary; Includes Hot Lunch

For questions about Intellectual Property matters, contact  Greg Popowitz below.

ASSOULINE & BERLOWE, P.A.

213 East Sheridan Street, Suite 3

Dania Beach, Florida  33004

Main: 954.929.1899

Fax: 954.922.6662

http://www.assoulineberlowe.com/

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Fountainebleau Las Vegas Bankruptcy is Not Finished

Bankruptcy Litigation

Today, nearly five years since the Fountainebleu Las Vegas bankruptcy was initially filed, at the height of the economic downturn and the crest of the real estate crisis, the Trustee Soneet Kapila filed two new adversary proceeding lawsuits seeking to recover alleged preferential transfers made to third parties by one of the debtors.  The two defendants that were sued in two separate preference actions are the internationally known company Honeywell International, Inc. and L.A. Nevada, Inc. dba G&G Systems.

Focusing on the L.A. Nevada, Inc. G & G Systems case, the Trustee was appointed in 2010 and according to the Complaint a demand for the return of the payment was made on March 4, 2011.

A copy of the demand letter is not attached, nor is any contract that establishes the basis upon which the payment to this vendor was made.

As with most of these cases, it is possible that one or more defenses may apply that may reduce, if not eliminate, the claim.  For example, there may be a Ordinary Course of Business Defense, which is when a debt is paid under ordinary terms that would be expected based upon the relationship of the parties.

Another defense that often comes up in these preferential transfer cases is New Value Defense, which states that if new value, either in the form of goods or services, was extended to the Debtor at the time that the payment was made, it may constitute a defense to all or part of the claim.

Either way, it is certain that this party is probably not happy to receive this lawsuit almost five years after the case was initially filed and almost three years after a demand for payment was made and apparently refused.

If you have a bankruptcy litigation question you would like answered, please do not hesitate to contact Eric N. Assouline.

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ASSOULINE & BERLOWE – The BUSINESS LAW Firm

http://www.assoulineberlowe.com

With offices in Miami, Ft. Lauderdale, and Boca Raton

ERIC N. ASSOULINE, ESQ.

ASSOULINE & BERLOWE, P.A.

Intellectual Property, Labor & Employment Law, Bankruptcy, Commercial Litigation, and Corporate Law

Miami · Ft. Lauderdale · Boca Raton

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Eric N. Assouline
Business Litigation

 

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Arbitration of Bankruptcy Issues

Bankruptcy Claims May be Arbitrated

A Compelling Arbitration Case: Court Grants Motion to Compel Arbitration for Both Bankruptcy and Non-Bankruptcy Issues

Laura Napoli on January 3, 2013 ·
Weil Gotshal & Manges, LLP Blog
In MicroBilt Corp. v. Fidelity National Information Services, Inc. (In re MicroBilt Corp.), No. 12-01167, 2012 WL 6137610 (Bankr. D.N.J. Dec. 11, 2012), the United States Bankruptcy Court for the District of New Jersey recently decided that certain claims, including claims relating to violation of the automatic stay, were subject to binding arbitration.

Background

MicroBilt provides online access to credit bureau data to small and medium sized businesses. MicroBilt had a longstanding contractual arrangement with Chex Systems, Inc., pursuant to which Chex sold financial information to MicroBilt, which then resold the information to credit unions, payday lenders, and car dealerships. In 2009, Chex and MicroBilt entered into a settlement to resolve a dispute that had arisen under the contract. As part of the settlement, the parties entered into a Resale Agreement.

Meanwhile, CL Verify, another credit information supplier, entered into a Data Reseller Agreement (“DRA”) with Certegy Ltd., a UK-based company. The DRA provided that Certegy would supply certain consumer credit card information exclusively to CL Verify, which CL Verify could then resell to its end users. In return, CL Verify agreed to pricing terms that were favorable to Certegy. Also around this time, CL Verify’s UK subsidiary, CLV UK, entered into an Independent Sales Organization Agreement (“ISO”) with Certegy, whereby Certegy agreed to market and develop CLV UK’s product within the United Kingdom. MicroBilt acquired CL Verify in 2010, and CL Verify assigned its assets, including the DRA and the ISO, to MicroBilt.

By late 2010, the relationship between Chex and MicroBilt had deteriorated again, and Chex asserted a series of defaults under the Resale Agreement. In March 2011, MicroBilt and CL Verify filed for chapter 11 relief. After the filings, Chex and its parent, Fidelity National Information Systems, Inc. (“FIS”), directed Certegy to end its support for CLV UK under the ISO. MicroBilt and CL Verify then commenced an adversary proceeding, alleging that FIS and Chex tortiously interfered with its existing and prospective contractual relationships. MicroBilt also alleged that FIS and Chex had violated the automatic stay provisions of the Bankruptcy Code through their postpetition actions. In response, Chex and Certegy sought to compel arbitration of the dispute, pointing to specific provisions in the Resale Agreement and the ISO, which required that any dispute arising out, of or relating to, the agreements be determined through alternative dispute resolution.

The Tortious Interference Claims

The court first focused on the tortious interference claims and found that all of those claims fell within the context of the arbitration clauses in the Resale Agreement, the ISO, and the DRA. Because the Federal Arbitration Act requires courts to compel arbitration when an agreement requires it, the court determined that it should defer to the arbitration provisions in the contracts and enforce arbitration.

The Stay Violation Claims

Turning next to the stay violation claims, the court found that, for these claims, the language of the underlying agreements was not helpful in determining whether the parties intended to include claims arising under the Bankruptcy Code in the arbitration provisions. Despite this, the court concluded that the mere fact that claims may arise under the Bankruptcy Code does not preclude them from being arbitrated. Instead, the court focused its inquiry into whether arbitration of the claims would interfere with or affect the distribution of the bankruptcy estate.

An examination of the facts led the court to conclude that arbitration would not result in interference with the estate because the disputed conduct (tortious interference with contract) did not allow Chex and FIS either to acquire possession or control over the debtors’ assets or to advance their own interests over those of other creditors. As evidence of this, the court noted that it had recently confirmed the debtors’ plan of reorganization, which provided for a 100% distribution to unsecured creditors and postpetition interest, as well as the assumption of all executory contracts. Finding no interference, the court noted that arbitration of the stay violation claims would not be inconsistent with the Bankruptcy Code’s goals and objectives, the bankruptcy court’s authority or the centralization of bankruptcy disputes. The court also stated that the stay violation claims were factually and legally linked with the tortious interference claims, lending additional support for the determination that the stay violation claims should be resolved with the tortious interference claims in arbitration.

The court’s decision in this case echoes the strong Third Circuit policy of resolving disputes via arbitration. Yet, not all courts may agree with this policy. For example, earlier this year we blogged about a decision where the Southern District of New York affirmed a holding of the bankruptcy court that concluded that the interests of the Bankruptcy Code outweighed those of the Federal Arbitration Act, at least when it comes to determinations regarding property of the estate. As courts continue to wrestle with the role arbitration clauses should play in bankruptcy issues, it will be interesting to see how the line will be drawn between the competing policy interests of the Bankruptcy Code and the Federal Arbitration Act.

There is support for this position in Florida bankruptcy courts. But there is little case law on the subject.
If you need assistance discussing business issues involving either arbitration or bankruptcy matters, call us.

ERIC N. ASSOULINE, ESQ.


ASSOULINE & BERLOWE, P.A.
http://www.assoulineberlowe.com

Intellectual Property, Labor & Employment Law, Bankruptcy, Commercial Litigation, and Corporate Law

Miami · Ft. Lauderdale · Boca Raton

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